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Most people hate annual performance reviews It continues to amaze me how slow companies are to realize that annual performance reviews belong to the past. Going through this aged and somewhat static process has been largely recognized by employees and managers as a painful, biased and “rigged” endeavor. Managers often have incentives to inflate or deflate appraisals to meet certain metrics. Even accurate feedback can feel biased and unfair. Organizations don’t distinguish between good evaluators and bad ones. A 2013 study by Kansas State University summarizes this best: “Our study finds that basically every single person hates performance reviews.” I’m not revealing anything new by saying that we live in a very dynamic environment where constant change is the norm. Systematic and close monitoring of competitive activity, as well as economic and geopolitical issues, requires ongoing changes in business goals. Employees’ individual objectives need to be adjusted as well, but this process can conflict with the annual set of goals that are measured in the traditional, static annual performance review. Millennials demand real-time feedback in everything they do In addition, millennials now have passed generation X as the largest share of the American workforce, with 18-34 year-olds accounting for roughly a third of all employees. This group overwhelmingly is asking for more frequent feedback in how they are doing. Not annual, not bi-annual. They don’t want to feel “in the dark” for eleven months or even five months. Nearly 85% of millennials in a recent TriNet survey said they would feel more confident if they could have more frequent conversations with their managers, at least bi-monthly (and sometimes more frequently – yes, see you next week!!). The more often you check in, the more fluid, authentic and effective those conversations will become. Nearly 10% of Fortune 500 companies have started the revolution Now, let’s acknowledge that several companies (around 30 large corporations) have already realized and taken the step to eliminate the annual performance review and replace it with ongoing performance feedback loops enabled by new technology and more informal, higher quality, timely, efficient and effective conversations between managers and teams. IBM, GE, Microsoft, Adobe, SAP, KPMG and Cargill, among others, have taken this critical step and are enjoying the benefits of this necessary change. In fact, IBM turned to its 380,000 employees to crowdsource the process through its internal social media platform, resulting in over 75,000 views and 2,000 comments and recommendations that overwhelmingly asked to eliminate the stack ranking process. Furthermore, employees wanted more frequent feedback, flexibility and ability to change their goals as the year progressed. This shift generates a huge sigh of relief and an increase in employee engagement and retention. Another company that recently changed the old-school process is Accenture. As of September 2015, 330,000 people are going through this “massive revolution” in Accenture’s internal operations. The company’s CEO Pierre Nanterme stated, “All this terminology of rankings – forcing rankings along some distribution curve or whatever – we’re done with that, we’re going to evaluate you in your role, not vis à vis someone else who might work in Washington, who might work in Bangalore. It’s irrelevant. It should be about you.” Science also supports the elimination of these misleading, cumbersome and complex performance management systems. In the context of neuroscience research, the labeling of people with a simplistic and biased numerical ratings automatically generates an overwhelming “fight or flight” response that impairs good judgment, similar to an imminent physical threat, like a confrontation with a wild animal. It works against the kind of thoughtful, reflective dialogue you want managers and their teams to have so they can learn and improve. As a personal example, many years ago, under a 1-5 rating system, 5 being the highest, I had a manager that gave me 5s in every single main category and sub-category of the form. And it was not a short form. The message I really got out of that experience was that there was no thought, no meaningful recommendation and consequently no improvement, in other words, the opposite of what you would expect from a 5 rating. My reaction: negative!! More recently, a close friend of mine shared his experience of receiving a 4 under the same scale but with the manager’s recognition that he had done everything superbly. His reaction: negative!! The manager’s answer: “We never give 5s to anyone, because then they’ll have nothing to strive for, or they’ll just ask for more raises.” So, I’m sure we all have plenty of stories like this and evidence that this is a broken “rear view mirror process” that has to go. Technology makes it easier to eliminate the annual performance review. What are you waiting for? Technology is available now to enable faster adoption of new appraisal and more frequent feedback systems. So, why aren’t more leaders jumping on this change? Do we need more attrition to happen before we take action? Performance management is a real-time process, flexible, proactive, constructive, transparent, collaborative, positive and growth oriented. As a leader in your organization, don’t accept the age-old response, “But we’ve always done it that way!” Take the lead, eliminate the annual performance review. Great leaders know that frequent communication with employees is critical to the collective success of an organization. It’s time to start. Even if you don’t have an immediate solution, or a performance tracking app or a revamped rating system, I bet you will be able to improve your overall team’s performance just by eliminating once-and-for-all the dreaded annual performance review process. _____________________________________________________________________ Alvaro Vaselli is a Senior Global Business Executive with a 20+ year record of driving profitable growth in multiple B2B industries. Most recently, he was President of the Personal Care Division of a $1B industry leader in the plastic films business. Alvaro’s roles have included general management, business development, sales and marketing. He has a strong International background and speaks Portuguese, English and Spanish. Learn more at www.linkedin.com/in/alvarovaselli, or contact Alvaro at 484-432-3437 or avaselli@mac.com.
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